The U.S. dollar fell on Tuesday, reversing earlier gains, after data showed that U.S. job openings fell in July, before this week’s highly anticipated jobs report for August.
Job openings, a measure of labor demand dropped 338,000 to 8.827 million on the last day of July, the lowest level since March 2021.
The data is “a very soft look at labor demand as outright job openings continue to slide in response to the increasingly evident lagged impact of higher policy rates,” Ben Jeffery, an interest rate strategist at BMO Capital Markets said in a note.
Against a basket of currencies, the dollar was last down 0.11% at 103.82. It is holding below the 104.44 level reached on Friday, which was the highest since June 1.
U.S. economic resilience has raised concern that the Federal Reserve could make further rate increases in an effort to bring inflation back down closer to its 2% annual target.
U.S. personal consumption expenditures on Thursday and the August jobs reports on Friday are in focus this week for further clues on the direction and strength of the U.S. economy.
Other data on Tuesday showed that U.S. consumer confidence was below economists’ expectations, and U.S. home prices rose on a monthly basis in June, while annual prices were unchanged.
Federal Reserve Chair Jerome Powell said on Friday that further rate increases may be needed to cool still-too-high inflation, but also promised to move with care at upcoming meetings.
Markets are pricing in an 85% chance of the Fed standing pat on interest rates next month, according to the CME Group’s FedWatch Tool, but the odds of a hike by the November meeting are now at around 56% compared with 46% a week earlier.
The dollar briefly reached an almost 10-month high against the Japanese yen earlier on Tuesday as investors priced in the likelihood of a more hawkish Fed.
The Bank of Japan remains an outlier among global central banks with its loose monetary policy, even as it slowly shifts away from yield curve control.
“It is moving away from excessively loose monetary policy, but it’s doing so at a very slow and measured pace,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto. “It’s still punitive to be short dollar/yen.”
The dollar hit 147.375 yen on Tuesday, the highest since Nov. 7, and was last at 146.365, down 0.12% on the day.
Traders are watching for any signs of intervention by Japanese officials to shore up the ailing currency. Japan intervened in currency markets last September when the dollar rose past 145 yen, prompting the Ministry of Finance to buy the yen and push the pair back to around 140 yen.
Charu Chanana, market strategist at Saxo, said that the intervention threat has retreated at sub-150 levels, given a lack of currency-related comments from Bank of Japan Governor Kazuo Ueda at the Jackson Hole conference and no signs of verbal intervention yet.
Concerns about China’s weakening economy have also boosted the greenback in recent weeks, even as the yuan is being buoyed by the Chinese central bank’s month-long effort to set the daily fixing at stronger-than-expected levels.
“It does feel like we’re heading toward the risk of a liquidity trap in China and that risk premium is being priced into the yuan and that’s helping boost the dollar via safe haven and liquidity demand,” said Rai.
Eurozone inflation data due on Thursday may be key to whether or not the European Central Bank hikes rates at its September meeting, which in turn could set the near-term tone for the euro.
“We have the euro zone CPI report Thursday which the market is putting a great deal of weight on with the ECB’s decision in September seen as finely balanced,” said Lee Hardman, senior currency analyst at MUFG.